The Government Accounting Office (GAO) today issued a report citing what it described as “weakness” in addressing vulnerabilities to improper payments, while acknowledging that improvement had been made to contractor oversight.

According to the published report, CMS did not establish an adequate process in the 3-year demonstration project or in planning for the national program to address RAC-identified vulnerabilities that led to improper payments, such as paying duplicate claims for the same service. CMS stated that one purpose of the demonstration project was to obtain information to help prevent improper payments. However, CMS has not yet implemented corrective actions for 60 percent of the most significant RAC-identified vulnerabilities that led to improper payments, a situation that left 35 of 58 unaddressed. These were vulnerabilities for which RACs identified over $1 million in improper payments for medical services or $500,000 for durable medical equipment.

$231 Million in Overpayments

The GAO report said that CMS developed a spreadsheet, which listed the most significant improper payment vulnerabilities that were identified by the RACs during the demonstration project. However, the agency did not develop a plan to take corrective action or implement sufficient monitoring, oversight, and control activities to ensure these significant vulnerabilities were addressed. Thus, CMS did not address significant vulnerabilities representing $231 million in overpayments identified by the RACs during the demonstration project.

For the RAC national program, according to the GAO, CMS developed a process to compile identified vulnerabilities and recommend actions to prevent improper payments. However, this corrective action process lacks certain essential procedures and staff with the authority to ensure that these vulnerabilities are resolved promptly and adequately to prevent further improper payments.

Lessons Learned

Based on lessons learned during the demonstration project, noted the GAO, CMS took multiple steps in the national program to resolve coordination issues between the RACs and Medicare claims administration contractors. During the demonstration project, CMS learned that having regular communication with the claims administration contractors on improper payment vulnerabilities that the RACs were identifying was important. CMS also learned that the data warehouse used to store claims information for the RACs needed more capacity and utility, that manual claims adjustment by claims administration contractors to recoup improper payments was burdensome, and that sharing paper copies of medical records between RACs and claims administration contractors when claims denials were appealed was difficult to manage. As a result, cited GAO, CMS took steps to resolve these coordination issues in the national program, such as enhancing the existing data warehouse and automating the claims-adjustment process.

The GAO report noted that CMS took steps to improve oversight of the accuracy of RACs’ claims reviews and the quality of their service to providers for the national program. CMS added processes to review the accuracy of RAC determinations, including independent reviews by another CMS contractor. CMS also established requirements to address provider concerns about service, such as having the RACs establish Web sites that will allow providers to track the status of a claim being reviewed. In addition, CMS established performance metrics that the agency will use to monitor RAC accuracy and service to providers.

In the report, GAO recommended that CMS improve its corrective action process by designating authorized personnel to evaluate and promptly address RAC- identified vulnerabilities to reduce overpayments. CMS agreed to the recommendation, according to the report.

More Insight on Appeal of Recoupments

“The GAO Report to Congress highlights many issues regarding the appeal of RAC recoupments,” said Dennis Jones, director of compliance services for CBIZ KA Consulting. “The most noticeable issue is that the absence of finalized appeal data from the RAC Demonstration project is keeping CMS from implementing the GAO’s primary recommendation.”

Jones said the GAO states that the principal flaw in the RAC program is that no initiatives have resulted from the RAC findings that would reduce the level of improper payments to providers.

“CMS states since that the majority of recoupments from the Demonstration Program came in its final months, the statistics on appeal results are incomplete, indeed there are still active appeals in the system from the Demonstration Project,” said Jones. “CMS feels that it would be premature to put ‘fixes’ in place for issues when the true impact of those issues are not known. The GAO, not in complete agreement, seems in favor of a prioritization plan that would require action on the issues with the largest financial impact. Since these issues are also likely to be the ones that result in the most appeals, it will be important to track this matter as these recommendations evolve into policy.”

Also of note, according to Jones, is that the GAO includes in this report some important performance metrics that are required of the RACs.

“Markedly the RACs are to have no more than 10 percent of their recoupments overturned in the first year of their contract and no more than 5 percent in the second year of their contract,” said Jones. “You may remember that the last published overturn rate from the Demonstration project was over 7 percent and that number was certain to rise as the final results of the Demonstration Project appeal statistics are calculated and released.”

Take Away for Providers

“The vulnerabilities of the demonstration project cited in the report are accurate,” said Carla Engle, Product Manager of MediRegs/Wolters Kluwer Law and Business. “CMS did identify many of these problems before the start of the permanent RAC project and made some corrective actions that are favorable to providers. We are still having some administrative problems during the early stages of the rollout that are the same though, especially concerning communication between the RACs and the claim processing contractors.”

Engle said the bottom line to providers is to keep those lines of communication with the RACs, MACs, CMS Project Officers, and advocacy groups like the American Hospital Association (AHA) to address the problems that continue to plague providers.

“We all demand system changes in tandem to ease the administrative burden,” said Engle. “I do believe CMS will be responsive.”